Run on Bank in Hong Kong

Submitted By Trader Mark
Looks like the shorts have taken their tactics overseas - AIG_Exposure">spreading rumors to drive down bank stocks (hey they've been banned from their "operations" in most Western countries, time to move to the East). This is causing a bank run in Hong Kong. Go hedge funds go - anything to make a few bucks. Somewhere HAL9000 is furiously writing text message after text message out it appears... you cannot stop HAL9000, you can only hope to contain him.

Thousands of savers mobbed branches of Hong Kong's 3rd largest bank amid panic that exposure to Lehman Brothers and AIG might bring the business down
The Bank of East Asia, which has branches in London and Birmingham, looked in danger of becoming the latest casualty of the global financial crisis as crowds scrambled to withdraw their cash. The drama came just days after the company revised its earnings downwards by almost 12% after it found that one of its workers had buried losses from an unauthorised trade.
Police were called in to control the crowds after text messages flashed across the city warning the bank was unstable as it held a large number of assets linked to the failed Wall Street bank and the troubled insurance firm.
Bank of East Asia Ltd., Hong Kong's third-largest lender, asked police to investigate ``malicious rumors'' that sparked a slump in its stock and queues at branches across the city.
``The management of BEA hereby states in the strongest possible terms that such rumors have no basis in fact,'' BEA said in an e-mailed statement today. ``The bank's financial position is sound and stable.''
"The rumors took various forms," said Bank of East Asia's deputy chief executive, Joseph Pang, at a news conference. "Some said the company's financials were problematic, and others said the government is about to take over our bank. Some others said there is a 10,000 Hong Kong dollars (US$1,282) limit to each withdrawal. All of these are baseless."
Up to 400 savers, many of them elderly, had to be held back as they battled to get inside one branch of BEA in the south of Hong Kong island before it closed.
At one branch they issued IOUs and told people to come back in the morning to claim their deposits, an AFP photographer said.
The 90-year-old lender said its ``exposure'' to bankrupt Lehman Brothers Holdings Inc. and American International Group Inc., taken over by the U.S. government last week, is about $61 million, less than 0.2 percent of assets.
Fund managers said the speed with which a few text messages could have escalated to a bank run reflects the current jittery climate that has gripped financial markets, with no end in sight. (banks are all about confidence so this is the easiest sector to manipulate with rumor - I cannot wait for the investigations in the US - the FBI is already starting as of last night)

Just remember - "subprime is contained" - Hank Paulson, spring 2007. Since it was right to trust his judgement then, it is right to trust his judgement now :) CNBC told me.